What’s the best way to destroy a law firm?
COVID-19 has shown you could burn down the office, but the firm will still survive. Yes, the lost files, equipment, and workspace would be painful. But the firm could keep on working.
You might send in malware: gumming up email, destroying systems and templates, holding firms to ransom. While the impact could be catastrophic, firms have survived ransomware attacks before. New files can be created. New templates, new processes.
But if you somehow manage to remove a firm’s people – the partners, the lawyers, yes even the support staff – that’s it. Game over. The firm falls apart.
We’ve written before about our profession’s fixation on technology as the solution to all our problems. And while we agree technology matters, we think it has distracted firms from their most valuable resource: people.
Think for a moment about all the ways we normally discuss the future of law. Articles emphasise the importance of AI and big data. Speakers debate productising legal services. Thought leaders talk about changing the law firm model and entering new markets.
This is all important. But as the research shows, focusing on these things over your people is like putting the cart before the horse, loading the cart up with pumpkins, putting the reins in the horse’s mouth… and expecting your pumpkins to make it to market.
How can a ‘good’ company become great?
Bestselling author and researcher Jim Collins has devoted over 25 years to understanding what makes an incredible company. He spent five of those years haunted by this question: how do ‘good’ companies leap ahead, become great, and dramatically outperform their competitors? This question drove him and his team to research the performance of 1,435 companies over 40 years. And after all that research, they found that the first, critical step toward greatness was – surprise – getting the right people on board.
It seems obvious, until you realise that this is the very first step. Collins was shocked. He fully expected to find that the journey started with a strong strategy – a clear direction. But the research categorically showed that wasn’t the case. If we pretend a company is a bus, then the ones that go from good to great start by: “getting the right people on the bus, the wrong people off the bus, and the right people in the right seats… first the people, then the direction – no matter how dire the circumstances.”
What does this mean for firms? It means that people must come first. It means that transforming your firm starts with transforming how your people are hired, managed, and work. It means recognising that the talent, recruitment and retention issues from which law firms suffer are actually the most business-critical challenge – and the single biggest barrier to growth. It means recognising these issues are also the source of many of your other problems, like client satisfaction and engagement.
Against this backdrop, it’s clear that Professor Sydney Finklestein isn’t exaggerating when he writes: “regenerating the talent pool is the single most important thing any leader can do to survive and prosper… [and i]f everyone is looking in the same talent pool, then it is going to be tougher to find those special people.”
So what are you doing – right now – to find and nurture the future of your firm?
Firms have done everything they can to survive the pandemic. They’ve reduced partner draws and implemented salary cuts or reduced hours. They’ve introduced hiring freezes and reduced graduate numbers. What’s gratifying is that many have learned a lesson from the mistakes of the GFC. The overall trend has been towards finding creative ways to keep talent, rather than making wholesale cuts that leave firms with both financial and reputational damage in the recovery period. Some firms are even using the pandemic as an opportunity to strategically headhunt key talent from their competitors (clever sausages). And while many firms have frozen hiring, many others are trying to introduce some flex into their processes, such as delaying start times for new hires while still trying to retain candidate engagement.
That’s why we think now is the perfect time to revolutionise how we deal with legal resourcing in Australia. Because what we do currently – what we’ve done unquestioningly for decades – isn’t good enough. The legal market in 2020 looks incredibly different from the way it looked in the 1990s. And yet firms still go about resourcing in the same ways: focusing on large graduate intakes and lateral hires to offset the nosedive in retention as lawyers progress. But despite the numbers of eager law students, since the early 2000s, firms have struggled with large gaps in resourcing. And for many groups within many firms – they simply cannot ever get enough. It’s become standard operating procedure to never have enough people to do the work.
You thought being a partner would give you autonomy to run your practice
But despite the supply side problems, partners no longer have the freedom to resource the way they need. Instead of being able to seize an opportunity to make a great hire and worry about workflow later, the rise of the management consultant and the MBA means that even the most profitable partners usually need to prove a business case for a full-time permanent lawyer, often based on a two-year forecast. This forecast can’t always be made – most partners can’t really see more than 12 months ahead at any given time (and declining client ‘stickiness’ has just made this worse). But even once a business case is proven, it’s only the beginning. In the last few years, every large firm (no matter how big their brand) has had significant trouble even getting applications for advertised roles. Many roles are empty for 12 or 18 months. Months! No wonder so many partners give up on recruiting and just tell their teams (usually implicitly) that they will just have to get on with it.
But when roles aren’t filled, or when a business case for permanent recruits can’t be established, everyone suffers. The partners, the lawyers, and let’s not forget, the clients.
In our view, almost every problem facing law firms today comes back to this very simple equation:
- Not enough lawyers when you need them.
- Too many lawyers when you don’t.
To be clear, having too many lawyers is almost as bad as not having enough. Frequently, the on-paper capacity in some parts of the firm masks the very real pain suffered in other parts due to under-resourcing. It’s “management by spreadsheet” as one of our friends calls it, a partner bemoaning his head office refusal to allow him to recruit just because other teams have capacity. And under-utilised lawyers suffer almost as much as over-utilised lawyers – from anxiety, fear, and self-doubt – which many continue to struggle with even once the work comes back in. An environment of scarcity can bring out the worst in us, damaging collegiality and teamwork, as lawyers scramble for work so they’re not humiliated by being under budget. And it can also bring out the worst in partners. Here’s just one example, from a partner whose team was so overworked, he summoned up the courage to approach the Managing Partner for assistance. The response? ‘We had a quiet first 6 months of the year so now they can work double to make up for it’. As though people are machines, for whom there are no consequences when you force them to fit 12 months’ worth of work into 6.
And never mind all the hurt feelings – underutilised lawyers destroy profitability, and we can all agree we care about that.
We think it’s time to stop this endless cycle. To transform how we hire, how we work, how we manage legal resourcing. Because the supply-side problems in major law firms haven’t gone away due to the pandemic, they’re just temporarily paused. Unless firms rethink legal resourcing, when things heat up again, they’ll be back to square one. Or worse, they’ll be left struggling with basic resourcing while other firms focus on their people (including by stealing the best talent from others).
So, where should we start? Luckily, Collins has done the research for us. Get the right people on the bus, get the wrong people off the bus, and get the right people in the right seats.
Getting the right people on the bus… and the wrong people off
If you were in charge of recruiting for the US Navy’s special ops forces, the SEALs, how would you hire them?
It’s literally a life-or-death question. SEAL teams are deployed across a range of missions: reconnaissance, hostage rescue, direct action, information warfare. They’re deployed against a range of enemies – terrorists, drug cartels, traditional armies. And they’re deployed in a range of environments: sea, air and land.
If we were to use the same methods for recruiting SEALs as we currently use to recruit lawyers, we’d look first for high performance. We’d scan CVs for academic results and co-curriculars, for SEALs we’d add in physical skills and performance. We might do some psychometric or aptitude testing, (in an ad hoc kind of way). Then we’d interview those who passed our minimum standard, looking again for high performance, but also a sense of ‘cultural fit’. There might be a few coffees with people across the team (or beers probably, for the SEALs). But, if the team is hurting due to overwork, we might still hire a candidate we suspect is not a perfect cultural fit – as long as they have the right skills and a decent CV. And if it works out or it doesn’t, we’ll just muddle along somehow.
But that’s not how they recruit for Navy SEALs.
Yes, of course, performance is critical. Ask anyone who has to suffer through ‘Hell Week’, the notoriously gruelling test that candidates must pass to get into Phase 2 of training on a total of five hours of sleep. But shockingly, when recruiting for SEALs, performance actually comes second. Candidates are evaluated and ranked based on both performance (skill and ability) and trust (good character and whether they are seen as trustworthy by their team members).
Naturally, candidates who fall into the low performance, low trust quadrant don’t stand a chance. But what’s fascinating is that SEALs also don’t admit candidates in the top left quadrant – high performance, low trust – otherwise known as the ‘asshole’ candidates. In fact, they’ll hire a medium performer or even a low performer over an ‘asshole’ candidate, as long as those people have high trust.
Why? Because they’ve found ‘asshole’ candidates are toxic. They may individually be high performers, but they negatively impact their teammates, particularly new or junior members. They make it impossible to harness the power of the team, where the output and value is greater than what each individual could accomplish by themselves.
You might think that prioritising trust only makes sense in a military environment. However, Simon Sinek explored this in his recent book The Infinite Game (along with the unique methodology of the SEALs) and found this just wasn’t the case. When the Shell Oil Company tested this with their Shell ‘Ursa’ oil rig crew, they found investing in trust led to their production becoming a massive 43% better than industry benchmarks (and their accident and injury rate dropped by 84%).
You might say: fine, but that’s an oil company – not a law firm. But when we look at how firms work, we believe that trust is absolutely critical. Each and every one of our client relationships depend on trust. Within the firm, we all learn who we can trust and depend on, and who we can’t.
But if you aren’t persuaded by the story of the SEALs or the Sinek research, then have a look at a company that most of us rely on: Google. As we’ve touched on before, they spent two years collecting data through ‘Project Aristotle’, dedicated toward understanding how to create the perfect – and most productive – teams. Like most, they thought the best teams just needed the best people. But the data proved them wrong. They found the best teams needed five things: dependability (aka trust), structure and clarity, meaning, impact, and psychological safety (another essential facet of trust and the key contributor to the significant increase in safety on the Shell Ursa oil rig).
And it’s not just Google. Time and again, high-performing companies pursue strengthening teams over a single talented individual. Netflix called assholes ‘Brilliant Jerks’ and noted their “cost to effective teamwork is too high” in their famous slide pack that rocked the HR world. They must have struck a chord with that observation (and the rest of their fantastic content), since there are very few powerpoint presentations in existence that have ever gone viral and enjoyed over 19 million views.
So what does this mean for law firms?
In our view, this means law firms need to make sure that when we are recruiting for new talent, we need to focus on trust and cultural fit first. We think it means reviewing our existing people and identifying with honesty the ones who fall in the top left quadrant – the ‘assholes’ – and investing time and resources coaching them to increase their trustworthiness. It also means that when – despite our efforts – ‘assholes’ refuse to improve, firms need to build the courage and the capability to let them go, so they stop dragging down the team.
We know the assholes are almost always profitable. But we also know that they are toxic, and so do the Navy SEALs, Google and Netflix. All it takes is looking at them through the lens of relational capital, and what we already know deep down becomes clear: these people cost more money over time than they make. We will never be the best we can be while we let these people stay on our bus.
These are all things worthy of their own article, which is why we’ll dive deeper into them in our whitepaper, ‘Securing Your Law Firm’s Future: A Bowd Self-Help Guide to Legal Resourcing’. For now, we want to emphasise that all evidence shows that transforming firm hiring, management and development to emphasise trust will ensure you have the best people and the best teams. But we also want to acknowledge this doesn’t help the immediate legal resourcing problem. Which leads us to the next step.
Getting the right people in the right seats
Firms already know they’ll have a ‘dropoff’ in the graduates and lawyers they hire. Most try to solve for this by simply recruiting more graduates, hoping that after the attrition, they’ll still have some left over to become senior associates and partners.
We think this equation should be turned on its head. Instead, firms should narrow their approach – yes, narrow – to seek out, nourish and protect a core group of outstanding, high-trust and high-performance graduates and lawyers. No more ‘best of a bad bunch’ or ‘any port in a storm’ recruiting. No more hiring 30 because you really need 10. Take the time instead to carefully select and grow lawyers for perfect long-term value, skill, and cultural alignment. Stop being dazzled by graduates with 3 degrees, 6 languages and a side business in children’s custom-made roller-skates. Focus instead on coming to understand who the right people are – for you.
This approach will pay dividends by allowing the firm to properly invest in retaining and developing their future leaders, while also ensuring precious client relationships have longevity. It also solves the issue of having too many lawyers when the work just isn’t there: with a leaner core of lawyers, that shouldn’t be a problem.
Oh we know you need more juniors than you need seniors, and you don’t really mind that a bunch of them leave after a few years. But there is better way, and it also works when your best lawyers go overseas, take on parental duties, or when work suddenly skyrockets. We can look to the US and UK law firms, who already have an answer for us in Australia: a managed contractor workforce.
Using managed contractors
The equation of using managed contractors is simple. Once you have a core group of the best lawyers, you need to protect and retain them. This means being able to quickly get new resources in when work suddenly ramps up. The biggest challenges for partners in Australia are finding the right candidates, and establishing the business case for a permanent hire.
Using managed contractors solves both problems. The right specialist provider will have already taken the time to find the right people, and will have the deep industry knowledge to understand what you need on your team. And using these extra lawyers as contractors means there’s no need to build a business case or take on the risk of a permanent hire. It’s a common enough solution in US and UK law firms that it’s become known as the ‘accordion workforce’.
First, retain a core of valuable staff that form around 70% of your resources. Then, when you need an extra pair of hands, expand with managed legal contractors who fit seamlessly into your existing team.
Is it cheap? No. Does it work? Yes. Are we biased? Absolutely.
After all, aside from our legal consulting work, Bowd is a specialist managed contractor provider. But that’s actually not where we started. Bowd was founded with a mission: to help lawyers do their best work and love it. To help firms say yes to clients, yes to more opportunities and yes to their lawyers who are begging them to provide sustainable career pathways. We were founded to help lawyers say yes to work and also yes to a life outside of work. As senior lawyers ourselves, we know that legal resourcing is the biggest challenge facing firms. We also believe that nearly all other issues firms struggle with – client satisfaction, employee engagement and retention – are ultimately symptoms of this problem. That’s why we became a managed contractor provider, because we believe that transforming the way we work, and who we work with, can achieve our mission.
Transformation
You don’t have to desperately scramble to find the right people. You don’t have to burn out your existing teams. You don’t have to burn yourself out either. By transforming your who into a lean, core group of incredible lawyers who are loyal to you and who you protect in return – supplementing as needed with managed legal contractors – you will improve client service and profitability, while also increasing retention and agility. We don’t think there is a law firm out there yet who has this kind of model nailed. But the potential for such a law firm is almost limitless.
Ready to know more? Sign up to our mailing list here and get a copy of ‘Getting the Best Work from the Best People – a Self Help guide for Law firms on Managing Flexible Teams’ as soon as it drops. And stay tuned for the next and final piece in our Transformation series.
